(Sept. 23, 2009 - Chinavestor) Despite recent weakness since August 2009, the Shanghai Composite Index is among the best performing indices year-to-date (YTD). So it is natural that western investors are trying to find ways to track the performance of such an important index.
The good news is that the Morgan Stanley China Fund (NYSE:CAF) is an investment vehicle that correlates to the Shanghai Composite very closely. As the following chart demonstrates, the Morgan Stanley China (NYSE:CAF) has been a very effective tool to get returns similar that of the Shanghai Composite index (SHA:000001).
The other advantage of the CAF is that it is a well diversified exchange traded fund or ETF, compared to similar, China tracking funds.
While the fund is somewhat commercial bank and real estate heavy, the underlying index is similar in fashion with Industrial and Commercial Bank of China (SHA:601398) being the second largest component of the Shanghai Composite Index.
So if you are willing to take more risk for a proposed higher return and are ready to invest in China, the Morgan Stanley China ETF (NYSE:CAF) is one excellent investment vehicle to do so. Considering that western investors are barred from participating in the Shanghai Stock Exchange, the Morgan Stanley China (CAF) is even more compelling.